CHINESE STRINGS

Whatever happens at the polls, some ties won’t break

In the last 12 years, first Néstor Kirchner and then Cristina Fernández de Kirchner have introduced drastic changes in Argentina’s foreign policy alignments.

It is quite noticeable how China and Russia have replaced the US and Europe as Argentina’s non-regional partners of choice — and the way in which this country has strengthened its ties with countries like Ecuador and Venezuela. All this is reflected in the formal political statements, in the narrative and — quite clearly — in Argentina’s trade, investment and financial relations.

There is a general agreement on the fact that China is not longer a communist state. But there is also a consensus that it would be equally wrong to say it is a capitalist state comparable to the US or the EU countries. It is also quite clear that, even if the cold war is something of the past, China — as well as, but not always together with Russia — competes in geopolitical terms with the US and its European partners. And that such state of affairs is very noticeable in Latin America.

China’s LatAm role

One of the most significant elements in this scenario is the new role currently played by Beijing in the region’s finances. In addition to its financial involvement in Brazil, China is nowadays the largest source of funding for Venezuela, Ecuador, and Argentina. And Chinese developmental banks’ investments in Latin America are larger than those of the World Bank and the Inter-American Development Bank.

Last week, Venezuela’s government triumphantly announced that it had obtained a new loan from the Chinese government. It was possibly the only piece of good news for Caracas, at a time when the country is facing a new crisis of violent demonstrations and lootings. However, the news on the loan was not too surprising — especially because the Chinese lender expects to be paid back in oil and not in cash.

Commodities exchange

A good percentage of the Chinese financing in Latin America is linked directly or indirectly to other deals that have to do with commodities — oil from Venezuela, agricultural exports from Argentina — or, as it happens like in Ecuador, with projects in which there is a significant involvement of Chinese companies.

Consequently, countries like Venezuela, Ecuador or Argentina are likely to have an easier life at the time of negotiating finances. Which, when combined with trade or investment, offer more room for flexibility. The more elements there are on the negotiating table, the easier it is to exchange concessions. Much more so if politics are part of the equation.

Financial negotiations with China often have an even more important advantage for these three Latin American countries, which share unorthodox economic policies that are often anathema for bankers. The latter’s priority is profit, and, therefore, they need to satisfy their boards, shareholders, auditors and regulatory authorities. By contrast, state negotiators are held accountable by political masters and their objectives. And these will often prioritize the political over the financial gains involved in a loan or a joint venture.

Future foreign policy

This has worked well for both China and Argentina during the Kirchners’ presidencies. So the question is what will happen after December 10.

Opinion polls suggest that the only two real competitors are the FPV’s Daniel Scioli or — through the intricacies of a two-round election — PRO’s Mauricio Macri.

In the last few months, Scioli has kept busy making clear his alignment with CFK’s policies. He was so successful that the purists within FPV who rejected him as a right-of-centre infiltrator shifted their narrative to a warm support. The fact that his vice-presidential candidate is Carlos Zannini —who is considered to be one of the government’s key strategists — has likely helped.

Scioli’s competitor Mauricio Macri has also been busy explaining that he agrees with, and will not drastically change, some of the basic tenets of this government’s policies. He mentioned social benefits and nationalizations. But he did not include foreign policy in that list.

In any case, drastic changes in Argentina’s international alignments would not be easy. True, it is relatively easy to change the rhetoric, or the statements in international organizations which a nation-state endorses. It is less easy to move away from financial commitments or trade patterns.

Argentina would need to find new lenders and new clients for its exports. None of this happens at short notice. So, whatever happens in the presidential election, Argentina’s ties with China are likely to remain strong for the foreseeable future.

@andresfederman

CREDITS: BUENOS AIRES HERALD